Initial 'AOL Day' looms as a big test

Wall Street wants to hear America Online's strategy

NEW YORK (CBS.MW) -- A major test for AOL Time Warner and its troubled flagship division is scheduled for Tuesday, which the company has dubbed "AOL Day."

AOL Time Warner, the world's largest media and Internet company, is taking the bold step of inviting hundreds of investors, analysts and reporters to attend the company's self-described AOL Day, to be held in midtown Manhattan, the first such event since the January 2001 merger that created AOL Time Warner
AOL

Jon Miller, the new chief of the America Online unit, will preside over the meeting. Don Logan, a veteran Time Inc. executive who was recently installed to help oversee the giant's media "content" businesses, will play a supporting role at the event.

Executives will discuss the strides they believe America Online has made recently in picking up new customers. They may address persistent market rumors that AOL will move much, or all, of the editorial content on the Web sites of such AOL-owned magazines as Time, Fortune, Entertainment Weekly, People and Sports Illustrated to America Online as a way to boost traffic on the site.

"On AOL Day, the company will specifically outline its plans for the revitalization of the [America Online] unit," said Frederick Moran, an analyst with Jefferies & Co.

Moran said he wants to hear the company discuss "in detail, its concrete plan for the penetration of the broadband market."

Generally, Moran is maintaining a show-me perspective toward America Online. "We're not sure," he said, "that one should anticipate a material turnaround."

Strategy

Investors are eager to hear AOL's strategy.

"For the stock to work beyond the $15 to $16 level, the company must demonstrate a clear and convincing plan at its Dec. 3 analyst meeting to stabilize the AOL business and resume growth," said Michael Gallant, a media industry analyst with CIBC World Markets.

Speculation has also built that America Online will soon adopt a cable-television-style billing policy, meaning customers would pay for each service they seek, rather than AOL's current flat fee.

Wall Streeters have said they're hoping for updates on the following topics:

Online advertising spending. America Online has been devastated by the slowdown in ad revenue in recent years.

The government's investigation into business practices at America Online.

The company's projections for AOL covering the first quarter of 2003

Investors and analysts, of course, are not completely in the dark. Chief Executive Richard Parsons effectively summarized his company's strategy in a Nov. 22 talk. Parsons, speaking at a Variety conference, said, "We're a content company," implying that the company's success would hinge on its ability to cross-market Time Warner magazine, movie, music, book and television material.

AOL hopes the combination of Miller and Logan, representing the two sides of the post-merger media behemoth, will go a long way toward showing skeptics that America Online remains a valued member of the family and that the Time Warner faction of the colossus is aligned with Miller.

AOL's shares were up 39 cents, or 2.4 percent, to $16.76, in midday trades Monday. While it remains far from its all-time high, the stock has made a credible rebound from an August low under $10.

Big meeting

Knowledgeable sources said the company's Tuesday gathering - expected to convene at 8:30 a.m. Eastern time and last for about four hours -- would be designed to show skeptics that the America Online division is showing signs of "stability."

While AOL executives harbor no illusion that America Online's problems will be fixed any time soon, they aim to show investors that the worst has passed.

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